How are LIHTC Rents determined?

Household income limitations are determined based on the
area's median gross income (AMGI) as determined by HUD. Each
year, HUD adjusts the area's median household income based on a
variety of factors such as the area economy and household
growth. Income restrictions are determined on a
Metropolitan Statistical Area (MSA) or county level, and are
determined for a household of 4 people. Let's use the
Columbus, Ohio MSA as an example to determine who can live in a
project at the 60% income level.

To get to the 60% level, we must start with the
HUD-determined Very Low Income (50%) number for the area.
Because HUD sometimes
adjusts eligible incomes based on area incomes and their
relation to area housing costs, it is not always accurate to
work backwards from the AMGI.

HUD VLI for a household of 4:

$25,300

Multiply *1.2 to adjust to 60%

*1.2

Maximum income for 4-person household at 60% of AMGI

$30,360

AMGI

$50,600

This figure is adjusted for household size as follows:

Household Size

Adjustment

Columbus Maximum

One-person household

70% (*0.7)

$21,252

Two-person household

80% (*0.8)

$24,288

Three-person household

90% (*0.9)

$27,324

Four-person household

100% (no adjustment)

$30,360

Five-person household

108% (*1.08)

$32,789

Six-person household

116% (*1.16)

$35,218

Maximum rents are based on tenants at maximum income paying
no more than 30% of their income for housing. Maximum rents for
unit type are set by the expected occupancy, regardless of the
number of people who actually live in the unit. The
following table illustrates:

Unit Type

Expected Occupancy

Maximum Income

Maximum Rent
(Income/12)*.3

Studio

1.0 person

$21,252

$531

One-Bedroom

1.5 persons

$22,770

$569

Two-Bedroom

3.0 persons

$27,354

$683

Three-Bedroom

4.5 persons

$31,574

$789

Four-Bedroom

6.0 persons

$35,218

$880

It is important to note that adjusting the maximum incomes to
expected occupancy totals requires additional calculation.
To determine the maximum income for a one-bedroom unit with an
expected occupancy of 1.5 persons (as in the chart above), one
can either multiply the unadjusted four-person rate by 75%
(*0.75) or add the one-person and two-person incomes and then
divide by two to get the average. Likewise, to calculate
the 4.5 person limit, one can either multiply the four-person
limit by 104% (*1.04) or take the average of the four- and
five-person totals.

A household may live in an LIHTC unit if the household income
is no greater than the maximum allowed for that size household.
If a two-person household making the maximum for Columbus
($24,288) wished to live in a three-bedroom unit set at the
maximum allowable rent ($789), it is allowable under program
guidelines. Ultimately, it would be up to the property's
management to determine whether they wish to accept a household
paying 39.0% of their income for rent. However, given the
program's guidelines, all households making less than the
maximum for their household size will pay greater than 30% of
their income for rent if rent is set at the maximum allowable.
We surveyed several communities in the Midwest in 1993 to
determine the percentage of rent paid by LIHTC renters. In
our sample survey, 10.9% of all renters were paying over 50% of
income toward rent, and 40.3% were paying over 40% of income
toward rent. We have heard of other surveys that have
found up to 25% of all LIHTC renters paying over 50% of income
toward rent.